The UK economy grew by a greater-than-expected 0.3% between April and June, albeit under a 0.7% rise in the primary three months of the yr — however this combined image could permit mortgage lenders to proceed to decrease costs.
Britain’s second-quarter gross home product was pushed by will increase of 0.4% in companies and a 1.2% bounce in building, whereas the manufacturing sector fell by 0.3%, Office for National Statistics knowledge exhibits.
The UK economy was forecast to publish simply 0.1% growth in the second quarter of the yr.
However, this was under a robust begin to the yr, the place financial exercise had been pulled into the primary quarter of the yr forward of the imposition of US tariffs and adjustments to UK stamp responsibility thresholds on 1 April.
June noticed growth bounce by 0.4% “with growth in all three sectors”, says the ONS.
Deutsche Bank chief UK economist Sanjay Raja argues that growth in June will present “robust and constructive ‘carry over’ results into the third quarter of the yr,” reaffirming the funding financial institution’s 1.2% growth forecast for 2025.
But after a stellar first quarter, the UK economy seems to have reverted again to its anaemic imply of current years, says Quilter funding strategist Lindsay James.
James provides: “The labour market is weakening, the federal government seems to be planning for added tax hikes in the autumn and international components make enterprise planning troublesome.
“None of those points carry straightforward fixes and there are only a few short-term options.”
But lenders in the mortgage market have used the final three months to make gross sales.
John Charcol mortgage technical supervisor Nicholas Mendes says: “The market feels extra settled than it did a yr in the past. Rates have been edging decrease in current weeks, helped by a fall in swap charges and a wave of competitors between lenders.
“Many banks are behind on their annual lending targets, in order that they’re sharpening costs to win remortgage enterprise, which is why we’re now seeing two- and five-year offers dip under 3.8%, despite the fact that inflation continues to be above goal.
“The hole between pandemic-era sub-2% mortgages and at the moment’s offers stays, however the ‘fee shock’ has eased in comparison with the highs of 2023 when two-year fixes averaged shut to six.9%.
“Over the following few months, I anticipate gradual reductions quite than dramatic falls. If inflation and labour market knowledge maintain regular, we might see best-buy charges transfer in the direction of the mid-threes in 2026 however, as we’ve seen earlier than, markets can flip shortly.”
Trinity Financial merchandise and communications supervisor Aaron Strutt factors out: “Banks and constructing societies are continually having to make bigger price and standards adjustments and adapt to the present market circumstances to keep up their lending volumes.
“This newest discount in financial growth doesn’t make issues any simpler for the monetary sector or the property market. Even the governor of the Bank of England [Andrew Bailey] highlights that there’s a lot of uncertainty for the time being, and it’s impacting folks’s attitudes in the direction of shopping for properties and spending cash.”
